Allocative inefficiency in agriculture is an issue puzzling researchers and policy-makers in China. Based on household data from the China Family Panel Studies of 2012, the present paper quantifies the potential distortions in China's agricultural production and examines their underlying determinants across regions. The results reveal that there are different levels of distortions across regions. The Middle region is facing the greatest distortion. Increases in machinery input, the proportion of non-farm income and effective labor input will reduce distortions. Household saving, farmland rent and farmland size are significantly positively related to distortions. There is a complementary effect between labor and farmland in alleviating production inefficiency, but substitution effects exist between capital and farmland and also capital and labor. The increase in farmland size will aggravate the impact of capital on distortions. Given the constraint of super small-scale farmland, facilitating land transfer is a necessary precondition for improving allocative efficiency.
Structuring contracts to share interest and risk is the central premise of farmland transfer, yet the contract framework and its determinants have rarely been empirically tested based on micro-level data. In this study, we aim to examine factors underlying the balanced distribution of residual controls and risk sharing on contract framework by using field surveyed data of 353 individual farmland transfer contracts. Our evidence shows that the policy of farmland property rights registration has a significant effect on the contract framework and supports the implication of enforcement costs exerted by the effects of the scale ratio and the contract form, contract duration, conversion way, and long-lived assets input. Although our findings fail to support the typical implication of risk sharing as an explanation of contract framework of farmland transfer, given the symmetric positions of two contracted parties of rural farmer households, it is proved that right confirmation and contract duration are two important factors underlying contract options.
IntroductionLarge-scale land rentals are a fundamental way of realizing the moderate-scale operation and transformation of modern agriculture. As the suppliers and main demanders in the land rental market, the decision-making logic of farmer households determines the scale of land rentals. However, land rentals have been plagued by the prominent issues of farmer households' insufficient participation and fragmented rental transactions. It is importance and urgent to promote farmer households' participation in large-scale land rental market.MethodsBased on a sample of 4,815 farmer households from the China Family Panel Studies (CFPS) database, this study applied Bivariate Tobit (Bi-Tobit) model to investigate the correlation between farmer households' decisions of rented-in and rented-out area, and analyzed the determinants and inherent logics of the decision making. Heterogeneity analysis was made to examine the difference in surplus and indebted farmer households.ResultsThe results showed that there was a significantly negative correlation between the household rented-in area and the rented-out area. The land value had significantly positive effect on the rented-in area and the rented-out area. Household social security had a significantly positive effect on the rented-out area, but had no significant effect on the rented-in area. For indebted households, only social security significantly affected their decisions of rented-out area, while for surplus households, land value rather than social security became the significant determinant of rented-in and rented-out area.DiscussionFarmer households' land rented-in area and rented-out area have comprised a dual decision with a significant negative correlation. Facing the dual functions of creating economic value and providing social security of rural land, farmer households' decision-making logic of rented-in area is dominated by economic rationality, whereas that of rented-out area involves the coexistence of economic rationality and survival rationality. With the improvement of household income level, the dominant logic of the decisions of land rental area transformed from survival rationality to economic rationality. Policies should enhance the rural social security system to increase land rental area, especially by providing adequate social security for farmer households with a lower income level.
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